When you help others, you can’t help helping yourself
“When you help others, you can’t help helping yourself” is a catchy line from the chorus of “The Money Song” from the Tony-award winning Broadway musical “Avenue Q.” But it also serves as good reminder that when you donate to United Way, there are inherent tax benefits that reduce the out of pocket cost of your gift and could even lead you to giving more to charity.
Let’s begin with the donation tax credit. Individuals who donate to a registered charity can claim this non-refundable credit to reduce their tax payable. For the first $200 worth of donations made by an individual in a year, the federal donation credit is equal to 15% of the amount given. With Ontario’s credit worth another 5.05%, that’s a total tax credit of 20.05%.
It gets better, though, the more you donate in a given year. Once you’ve made at least $200 worth of donations, the donation credit jumps to 29% federally, plus another 11.16% in Ontario for a total credit of 40.16%. High income earners reporting over $78,000 of income also realize surtax savings increasing their combined federal and Ontario credit to 46.41%. This means for a $1,000 Leadership gift to United Way, your actual out of pocket cost is $582.
The second major tax benefit is an opportunity to take advantage of the fact that just over five years ago, the government eliminated the capital gains tax on gifts of publicly listed securities, mutual funds and segregated funds to charity. So, if you have securities with significant gains and looming tax bill, consider donating them “in-kind” to United Way to reap the maximum tax benefits.
Jamie Golombek, a long-time supporter of United Way, is Managing Director, Tax and Estate Planning with CIBC in Toronto. Jamie is quoted frequently in the national media as an expert on taxation. He writes a weekly column, “Tax Expert”, in the National Post, and has appeared as a guest on CBC Newsworld and The National. In his spare time, Jamie teaches an MBA course in personal finance at the Schulich School of Business at York University in Toronto.